by

B.S.Nanda

Government is going to infuse Rs.12517 crores in 10 state-run Banks in FY13. This is not the first time.  Almost every year government infuses huge funds in the state run banks and on the other hand the banks lose money on bad debts.  

The bad debts on account of corporate lending have become most disturbing. For example, the lender banks are unable to recover Rs.14000 crores from Suzlon, Rs.7000 crores from KFA, Rs.3002 crores from Zoom Builders etc.etc.  The Corporate Debt Restructuring (CDR) tool is applied in all such loans from time to time in order to escape the non-recoverable situation.  A loan is eligible for CDR provided the initiatives to resolve the case under the CDR system create a positive sense. It is a well known fact that any advance which is adequately secured by tangible collateral security can be easily recovered.  

Bankers, generally, at lower levels, sanction loans carefully after taking adequate collateral security, may be by way of mortgage of adequately valued house property or land or by way of lien on fixed deposits in addition to post dated cheques to be utilized under section 138 to 142 of NI Act. They also keep watch on any diversion of the loan disbursed in course of time.   The bankers at lower level very happily recover such loans by disposing of the real estate which is so easy under Securitisation Act.  In case of lien on deposits, there is no chance of the borrower to escape as he is well aware that his deposits marked lien by the bankers can be easily set off to adjust the loan.  In case of corporate borrowers of comparatively lower range, the personal guarantee of the directors and mortgage of the personal property of directors are taken as collateral security to secure the corporate loan.  

What about the big size corporate loans like KFA, Suzlon, Zoom Builders etc.  Whether the personal property of directors have been evaluated and taken as mortgage?      Further, any diversion of funds released to such corporate are within the knowledge of the bankers who sanctioned such loans? If so, any timely step taken to bring back the diverted amount to the business for which loan sanctioned? Or the business modules in such loans are not economically viable?  Who made the assessments or credit appraisal? Whether the personal guarantees of directors have been taken to secure such big size loans?  Is it not necessary, in order to establish transparency, to place in public domain the details of such sub-standard or doubtful category advances in order to get an idea as to how the top bankers function?

 If there is no answer to such questions, what locus standi the bankers have to recover the loans of poor businessmen whose valuable property is mortgaged or fixed deposits are marked lien? Is it rational that bankers need to recover only the advances which are adequately secured and leave those on the plea of inadequate security? A sense prevails that the biggers escape and lesser trapped.  

Every year thousands of crores of rupees of tax payers are infused in banks. Such money goes to the big corporate and in long run become bad debts and written off. Are not the owners of such big corporate beneficiaries at the cost of tax payers’ money?  

Reserve Bank is not displaying the big defaulters names in their web site.   To escape public criticism, the FM sometimes cleverly declares packages like 76000 crores of rupees bad debts of farmers waived.  Here also big people had a good chunk.  Such attempts are to create a feeling that small people loans are also waived .  This is just to cover up the huge bad debts of certain corporate borrowers of the choice of the politicians / bureaucrats and divert the attention of public towards  the so called ideal benefit given to farmers, although tax payers money is involved here also.     

It is therefore urged upon the government to declare the losses made by state owned banks and SBI & its associates during last 20 years due to write of  corporate debts with names of owners of such corporate houses and the details of funding made to these banks each year from budget.